3 Big Takeaways from Rivian's Third Quarter

Rivian Automotive (NASDAQ: RIVN) recently reported third-quarter results that were better than expected and beat analysts' consensus estimates for both its top and bottom lines. That sent Rivian's stock soaring by more than 20% following the results.

But it's important to put the latest results into context. So let's look at three important takeaways from the third quarter and what they might mean for the electric vehicle (EV) company.

Image source: Rivian.

1. Revenue was higher than expected, thanks to tax credits

Automotive revenue jumped 47% to $1.1 billion in the quarter, with management saying the increase was driven in part by increased vehicle deliveries and a rise in average selling prices. That helped boost consolidated revenue by 78% to about $1.6 billion.

It's important for investors to know that part of the sales increase was also due to customers rushing to buy a vehicle before the EV tax credits expired at the end of September. The company's EVs were too expensive to directly qualify for them, but some customers were able to take advantage of leasing loopholes.

With the credits now expired, management said on the earnings call that it doesn't expect to have meaningful revenue from the sale of regulatory credits, "and we've taken those out of our forecast." The company also said that its deliveries of 13,201 in the quarter will be its highest quarter for the year.

In short, a rush by customers to get their hands on a new Rivian was partly fueled by credits, which helped boost deliveries and sales.

2. Tariff costs will be much lower

Tariffs have already caused a lot of turmoil in the auto industry, and their impact has had Rivian and its peers scrambling to find ways to lower costs. But a recent policy change from the Trump administration allows for vehicles built in the U.S. -- as Rivians are -- to receive a partial credit that helps offset some of the tariffs.

That's the technical way of saying that tariffs are going to be cheaper for the EV maker. Chief financial officer Claire McDonough said on the earnings call that the previous tariff impact on each vehicle in the third quarter was just under $2,000, but it will be reduced to just "a few hundred dollars per unit" for its new builds.

Tariffs of any amount aren't great for Rivian, but the new, lower costs are a big win for the company. It still has some vehicle inventory that doesn't qualify for credits, but management said once those are sold, its new vehicle builds in the fourth quarter will benefit from the tariff offsets.

3. Rivian was gross-profit positive for the second time this year

The company reported a small consolidated gross profit of $24 million in the quarter, a $416 million improvement from the year-ago quarter, and its second quarter of gross profit this year. It's not all sunshine and rainbows on this front, but it's making some progress that should be noted.

First, the company's automotive gross profit loss of $130 million was still a significant $249 million improvement from the year-ago quarter, thanks to increased average selling prices and cost reductions. What's more, Rivian had $154 million in software and services gross profit, improving $167 million from a loss in the year-ago quarter. The $167 million in gross profit as a result of its joint venture with Volkswagen.

While it was a good quarter on this front, Rivian will likely experience more fluctuations in its gross profitability, and investors shouldn't expect it to be positive from here on out.

Making the best of a difficult situation

Shareholders should keep an eye on Rivian's vehicle sales in the next quarter as the impact of the eliminated tax credits could cause them to be lower. Things could turn around a bit once the company launches its R2 model in the first half of 2026. It will have a lower starting price of around $45,000, which could be a catalyst for the EV maker, but it's still a big unknown at this point.

Still, as a shareholder, I'm pleased with Rivian's latest quarter, and it appears to be managing a difficult time in the EV industry very well.

Chris Neiger has positions in Rivian Automotive. The Motley Fool recommends Volkswagen Ag. The Motley Fool has a disclosure policy.